attorneys at Blue Capital Law Firm, P.C. (“Blue Capital” or the “Firm”) have experience in bankruptcy

, debtor and creditor issues, both in the transactional and litigation contexts. Our attorneys have experience in the negotiation and preparation of transactional and financing documents, workout agreements, deed-in-lieu agreements and forbearance agreements.

Blue Capital attorneys are problem solvers dedicated to finding the most effective, cost-efficient solutions to the business or personal problems of our clients. Whether this entails multi-faceted workouts involving joint ventures, partnerships, corporations or limited liability companies, complicated tax problems, non judicial foreclosures, or reorganization or liquidation in bankruptcy, we have the expertise to develop the strategies that best serves our clients' short- and long-term goals.

Our Firm currently represents a number of clients in various filings and proceedings under Chapter 7, 13 and 11 of the Bankruptcy Code.

Following herewith are abbreviated and preliminary descriptions of the various Chapters under the Bankruptcy Code:

CHAPTER 7 BANKRUPTCY

In a

Chapter 7 bankruptcy

, the Bankruptcy Court will discharge most types of debt including credit card balances, medical bills and finance company loans. Some types of debts like recent income taxes, student loans and child support obligations are not removed. On secured debts, like a home mortgage or car loan, petitioners have the option to keep their property and keep making the payments, through an affirmation of debt process, or surrender the property to the lender and accept discharge of liability. Petitioners generally are able to keep all of their property, unless they have substantial equity in the property beyond what California law (or the particular state-prescribed law) allows petitioners to protect.

If a petitioner’s household income is below the prescribed median income for the particular State (where the petition resides), our Firm typically can qualify him or her for a Chapter 7 bankruptcy. If the household income is more than the state prescribed median income, than we must calculate the income and expenses in the “Means Test” in order to determine if petitioners qualify for a Chapter 7.

Once the Chapter 7 petition is filed, the United States Bankruptcy Law prohibits all collection attempts by creditors including telephone calls. Approximately 30-45 days after a bankruptcy case, the court will schedule a Creditors Hearing (aka the “341A hearing”). Typically few or no creditors show up at the Creditors Hearing. Usually it is just the Chapter 7 Trustee who is present to ask petitioners to confirm the veracity of his/her testimony and other questions about assets and income.

In many cases, hearings last less than five minutes with the Trustee. It is the Trustee's responsibility to see if petitioners have any large assets like business equipment or substantial equity in real estate that could be liquidated to pay their debts to the creditors. Approximately 90-120 days (sometimes longer) after the conclusion of the 341 appearance, the petitioner receives the official order of discharge of debts by mail.

Court costs to file a Chapter 7 cases are $299 each. There are also two (2) financial management courses that must also be completed by each Debtor, as now required by the BANKRUPTCY REFORM ACT OF 2005. The attorney fees for Chapter 7 cases will vary on the nature and complexity of each case, finances and assets.

CHAPTER 13 BANKRUPTCY

A

Chapter 13 bankruptcy

is beneficial to a debtor in situations where non-exempt assets need to be protected, such as where there is equity in a home (above the homestead exemption limit) or when a house is in foreclosure or a car is near repossession.

Once the petition is filed, the Chapter 13 bankruptcy will promptly stop a foreclosure or a repossession and all the past due amounts may be put into the Chapter 13 plan and be paid to the court (i.e., that is to the Trustee) and disbursed to creditors over a 3 year or 5 year court approved payment plan period.
Additionally, Chapter 13 is typically intended for petitioners who have household income above the state prescribed mean income and/or fail the Means Income test (which would have disqualified such petitioners for a Chapter 7).

In a Chapter 13 bankruptcy, a payment plan is approved by the court. The debtor will make monthly payments to a court appointed trustee. The debtor will be required to pay back some or all of the debts over a 3-year or 5-year period. The amount of the payment is based on the amount of the petitioner’s income and expenses.

For secured loans like home mortgage or vehicle loans, petitioners have the option to continually pay these loans using the affirmation of debt process, or alternatively, petitioners can put any arrearages on these loans into the Chapter 13 plan and restructure the payments. Chapter 13 can also stop repossessions or foreclosures by allowing petitioners a 3-year or 5-year period to catch up the back payments through a court approved payment plan. Petitioners might also choose the option to surrender property and be relieved of the debt instead.

Once the Chapter 13 bankruptcy is filed, the United States Bankruptcy Law prohibits all creditor’s collection attempts, including telephone calls. Approximately 30 days after the Chapter 13 is filed with the court, petitioners are required to make an appearance in front of the court appointed trustee and the judge. The court and the trustee need to make sure that the debtors know and understand what payments will be required of the debtors and to make sure the debtors have enough income to make those payments. Once petitioner has completed the payment plan and has made all payments, the court will enter a discharge order which relieves petitioner of all liability for all debt stipulated in the Chapter 13 payment plan.

The court cost to file a Chapter 13 petition is $274. There are also two (2) financial management courses that must also be completed by each Debtor, as now required by the BANKRUPTCY REFORM ACT OF 2005. The attorney fees for a Chapter 13 case will depend on the nature and complexity of each case.

CHAPTER 11 BANKRUPTCY

The

Chapter 11 bankruptcy

is many times referred to as Business Debt Reorganization. In a Chapter 11 bankruptcy, the debtor remains in possession of all assets and the ongoing business.

A Chapter 11 bankruptcy allows a business to continue to operate without the day to day burden of their pre-existing debt obligations. It gives a business an opportunity to develop a plan to restructure debt and to relieve the business of leases and contracts that are economically unfeasible. In a typical Chapter 11 bankruptcy proceeding, management continues to run the day-to-day operation of the business. Many significant business decisions may require court approval, such as liquidating the assets of the business.

Chapter 11 is also intended for those individuals whose secured and unsecured debt levels exceed the maximum allowable under Chapter 13, and unfortunately, of the chapters, Chapter 11 is and tends to be the most complex of all Chapters. As such, costs, legal fees and expenses associated with a Chapter 11 filing are substantially higher. The current filing fee alone (not including legal fees and expenses) for a Chapter 11 is $1,039, which covers $1,000 case filing fee and a $39 miscellaneous administrative fee.

BANKRUPTCY REFORM ACT OF 2005

The largest reform of the United States Bankruptcy Law in 25 years took effect on October 17, 2005—the Bankruptcy Reform Act of 2005 (“Bankruptcy Reform”).

Under the Bankruptcy Reform petitioners filing bankruptcy must now provide the following:

A credit counseling certificate prior to the filing of bankruptcy

Proof of income for the six month prior to the filing of the bankruptcy

A copy of the debtor’s most recent tax return;

A financial counseling certificate prior to the discharge of the bankruptcy.

In addition, if the debtor’s household income is over the State prescribed median income, the debtor will have to qualify under the “MeansTest” prior to filing the Chapter 7 bankruptcy.

Please contact our bankruptcy attorney Bryan Ngo personally at 949-289-9900 or via email at BNgo@bluecapitallaw.com for more information. After an initial consultation on the phone or in person (at no charge), he will be able to advise you as to whether you will qualify to file a Chapter 7 bankruptcy under the new law. During the recent financial turmoil, Mr. Ngo has been serving as Orange County bankruptcy attorney to a number of clients in the surrounding California communities.

Blue Capital Law Firm, P.C. is fully committed to representing those homeowners, debtors, consumers and businesses that have been suffering from severe financial hardship.

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